For us, our name is the deepest connection to our identity and individuality. And it’s no different for brands! But we keep seeing a lot of examples, where brands opt for a name change - Zomato being the latest one!
This week, let’s explore different aspects of the name change.
Broadly, there could be two primary reasons brands opt for a name change:
Zomato recently decided to change its group name to “Eternal” since it has now expanded the business from food delivery to three more categories. Blinkit (grocery delivery), Hypercure (kitchen supplies delivery to restaurants) & FeedIndia (serving food to the underprivileged) are Zomatos’s new acquisitions.
Here, the name change signals that the company is heading towards a new direction.
In 2019, when Dunkin Donuts realized that its coffee sales form more than 60% of the total, it saw the opportunity in the breakfast business and therefore did away with “donuts” from its name.
The idea here was to change the perception that it's not just a donut place but also has other items in the menu.
The success of a name change depends upon how companies are educating existing customers on the rationale for the name change. Also, brands might want to keep track of whether or not the change is working well and customers feel connected.
After all, these decisions are reversible, and it is better to act if things are not going the way brands envisaged.
A big question is how fast or slow brands should go about the name change, and that might depend upon:
Shortly after a crash in 1996 that killed all 100 passengers on board, ValuJet changed its name to AirTran. Why? To manage the brand crisis and psychologically distance itself from the negative situation.
Hence making a strong case to quickly adopt a new name.
California Prune Board observed that youngsters did not want to eat prunes because they thought it is for old people. The Board experimented with the name “dried plums”; but, to be safe, for two years, they mentioned both names on the packets.
Once the board observed that young people perceived the fruits as healthy and started buying them more, they changed the name to dried plums.
In today’s internet age, experimenting with people’s perceptions of brands is not a tough task. One can always do A/B testing and see which names are working well for which customer segment.
And this testing might also help during a crisis, when one is already prepared with alternatives to deal with the affected customer segment.
While analyzing how the name change impacts investors, they should look at:
Facebook changed its name to Meta to signify that it was expanding offerings in the metaverse space, which will be a good move for the investors if the business pans out well in the long term.
But, it also came at a time when the social media platform faced legal scrutiny around privacy issues. Some felt that a name change was a way for the larger group to distance itself from the negative publicity.
As per a study, when the dot com bubble happened during the late 1990s, 95 companies added, “.com,” “.net,” or “Internet” to their names. On average, the stock prices of these companies increased 74% from 5 days before the name-change announcement to 5 days after.
And the disappointing fact was that few of them were nowhere close to running an “internet” business. Of course, these companies saw a stock price crash during the early 2000s dotcom crash.
In such name change events, it’s good for the investors to do a deep dive. At times, there might be short-term spikes in the stock prices after such events, but it is wise to keep an eye on where the business is headed in the coming months.
It’s great if the company is living up to the actual reason mentioned; but, if there are other marketing gimmicks involved, then it might not be the right place for investors to park their money.